Although Filipinos recognize stocks as a form of investment in the Philippines, only few Filipinos are actually invest in the stock market. These might have sprung from misconceptions like "only rich people can afford to buy shares" or "I didn't finish a business course therefore I have no capability to invest in stocks" -- which I find really disheartening. Equity investments are good ways to generate profit and diversifying your portfolio and with proper knowledge, anyone (whether you are a student -- like me! -- or a working professional) can venture in it.
Stocks are simply define by a lot of authors and websites as an investors ownership over a particular corporation in which he invested in. For example, a company has issued 10,000,000 shares and you bought 1,000,000 which is 10% of the overall share. This make you owner of 10% of the companies equity. This is a from of capital structuring used by corporations in order to obtain much need capital so that they can continue to operate or expand their companies. There are 2 basic types of share: Ordinary share, which are common and gives its holder the right to vote during board meeting and Preferred shares which has a fixed dividend rate. Owners of preferred shares are prioritized when companies issue dividends. I want to focus this post to Ordinary share as they are more common and less complex.
Now that we've had a brief background of what stocks are, let's go over to how you actually earn from stocks. There are 2 common ways namely is through dividends and through market price appreciation.
Dividends
Dividends are portions of a companies earning which are distributed to shareholders. The gain from dividends depend on how many shares of stock you have in the company. Let's say that X Company's board of directors decided to distribute dividends amounting to 1 PHP/ share. This means that if you are invested in 1 million share, you get PHP 1 million less taxes.
Market Prices Appreciation
Your investment could also profit simultaneously through price appreciation. Let's say the you bought 100 shares of Y Company for 5 PHP. After several weeks the price per share went up to 8 PHP. the result gave you 300 PHP (8 - 5 = 3 x 100) less of course taxes. The logic in this scenario is that you were able to buy the stocks cheaper than what they are currently priced in the market. This gives you an opportunity to sell them higher and realize gains from it. This method works well especially if you are a long term investor.
Now that you a have an idea on stocks, you're next step is to know When Should You Start Investing in it. Are you ready? Share you experience investing below!
Now that we've had a brief background of what stocks are, let's go over to how you actually earn from stocks. There are 2 common ways namely is through dividends and through market price appreciation.
Dividends
Dividends are portions of a companies earning which are distributed to shareholders. The gain from dividends depend on how many shares of stock you have in the company. Let's say that X Company's board of directors decided to distribute dividends amounting to 1 PHP/ share. This means that if you are invested in 1 million share, you get PHP 1 million less taxes.
Market Prices Appreciation
Your investment could also profit simultaneously through price appreciation. Let's say the you bought 100 shares of Y Company for 5 PHP. After several weeks the price per share went up to 8 PHP. the result gave you 300 PHP (8 - 5 = 3 x 100) less of course taxes. The logic in this scenario is that you were able to buy the stocks cheaper than what they are currently priced in the market. This gives you an opportunity to sell them higher and realize gains from it. This method works well especially if you are a long term investor.
Now that you a have an idea on stocks, you're next step is to know When Should You Start Investing in it. Are you ready? Share you experience investing below!
Happy investing!
Disclaimer: The article is based on my personal opinions and experiences. the post is not sponsored or any of the sort.
Sources:
Dividends: http://www.investopedia.com/terms/d/dividend.asp
Stocks: http://economictimes.indiatimes.com/definition/stocks
Disclaimer: The article is based on my personal opinions and experiences. the post is not sponsored or any of the sort.
Dividends: http://www.investopedia.com/terms/d/dividend.asp
Stocks: http://economictimes.indiatimes.com/definition/stocks
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